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Submission of the
International AntiCounterfeiting Coalition
Trade Act of 1974
Request for Public Comment
______________________________
Nigeria 29
Turkey 31
The International AntiCounterfeiting Coalition, Inc. (“IACC”) submits these
recommendations to the Office of the United States Trade Representative (“USTR”),
pursuant to a request for written submissions from the public concerning the acts,
policies, and practices of foreign countries relevant to the determination by the USTR, in
cooperation with its interagency partners in the Special 301 review (“Special 301”), under
Section 182 of the Omnibus Trade and Competitiveness Act of 1988, 19 USC § 2242, of
countries that deny adequate and effective protection of intellectual property rights
(“IPR”) or deny fair and equitable market access to U.S. persons who rely on intellectual
property protection.
The IACC is the world’s oldest and largest organization dedicated exclusively to
combating trademark counterfeiting and copyright piracy. Founded in 1979, and based
in Washington, D.C., the IACC represents approximately 250 corporations, trade
associations, and professional firms, spanning a broad cross-section of industries. IACC
members include many of the world’s best-known brands in the apparel, automotive,
electronics, entertainment, luxury goods, pharmaceutical, software, and other consumer
product sectors.
Central to the IACC’s mission is the education of both the general public and policy
makers regarding the severity and scope of the harms caused by intellectual property
crimes – not only to legitimate manufacturers and retailers, but also to consumers and
governments worldwide. The IACC seeks to address these threats by promoting the
adoption of legislative and regulatory regimes to effectively protect intellectual property
rights, and to encourage the application of resources sufficient to implement and enforce
those regimes.
To that end, the IACC worked with both foreign government officials and the private
sector throughout the past year to identify, and to seek remedies to, legislative deficiencies
and practical impediments to IP enforcement. The IACC has also led the development of
voluntary collaborative programs on a global scale to address key priorities in the online
space, including its RogueBlock and IACC MarketSafe programs. The role of
governments in encouraging these types of collaborative approaches remains vital
though. Further, rights-holders continue to face concerns that require direct intervention
by governments at home and abroad. The challenges faced by rights-holders continue to
evolve, and we welcome USTR’s assistance in resolving both the new concerns highlighted
in this year’s comments, and those which have been reported in past years’ submissions.
Whether measured in terms of lost sales to legitimate manufacturers, tax revenues and
duties that go unpaid to governments, decreased employment, or diminished investment
in capital improvements and research and development; counterfeiting is a significant
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drain on the U.S. and global economy. Further, the production and distribution of goods
produced in an entirely unregulated supply chain, where the makers have every incentive
to cut corners by using cheap, substandard components, and no incentive to abide by
accepted standards of consumer health and safety, presents a clear threat to the health
and well-being of consumers, and to the integrity of our national security infrastructure.
We look forward to working with you to ensure the safety of consumers and the vitality of
legitimate manufacturers and retailers impacted by the global trade in counterfeit and
pirated goods.
As in past years, the comments submitted by the IACC are drawn from a variety of sources
including surveys of member companies, interviews with local experts in the identified
countries of concern, research of publicly-available sources, and data generated by the
IACC through its own programs and direct engagement with foreign governments. It
should be noted, however, that the countries and issues discussed herein are not an
exhaustive list of rights-holders’ concerns, but merely a snapshot of current and ongoing
issues faced by rights-holders around the world, to which the IACC wishes to draw special
attention. It is expected that the majority of the countries and issues raised in this filing
will come as no surprise to USTR and the interagency team, as many of those highlighted
by IACC members are long-standing concerns that have been raised in previous years’
filings.
Our comments this year cover more than 35 countries, spanning five continents,
underscoring the truly global scope of the problems faced by rights-holders. Ten
countries are recommended for inclusion at the Priority Watch List level, and an
additional 13 for the Watch List. We also provide comments on several countries for
which we make no formal recommendation with regard to placement.
We thank you for the opportunity to share our experiences.
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CHINA
It will surely come as no surprise to USTR that the People’s Republic of China (“China” or
“PRC”) remains the country of highest priority for IACC members this year, as in
countless years past. China remains the single-greatest source of counterfeit goods sold
in the United States and around the world, a fact borne out by public seizure statistics
reported by U.S. Customs & Border Protection (“CBP”) and the European Union. Rights-
holders across all product sectors report broad-ranging concerns including
manufacturing, exports, retail sales in the domestic market, and a growing online trade
servicing both the domestic and international markets. Those concerns are amplified by
deficiencies in China’s substantive law and practical impediments to deterrent
enforcement (including a continued over-reliance on administrative remedies). Despite
some progress in recent years, counterfeiting continues on a massive scale in China,
impacting every industry, and serving as an impediment to market access and legitimate
competition.
China-sourced counterfeits provide the inventory that drives illicit brick-and-mortar
markets throughout the world; and increasingly, China-based websites, marketplaces,
and intermediaries, enable the online sale and distribution of counterfeit goods and
pirated content. Accordingly, and for the additional reasons set forth in these comments,
the IACC recommends China’s retention on the Special 301 Priority Watch List in 2018.
A foundational consideration for any brand is its ability to assert its rights – to register its
marks. We were troubled to hear reports this year from IACC member brands who
continue to face significant challenges at this fundamental level. Members described
several negative experiences related to application refusals with illogical and inconsistent
bases, inadequate analysis, and improper application of legal standards. While the China
Trademark Office (“CTMO”) has seen drastic growth in the number of trademark
applications filed in recent years, rights-holders urge the provision of greater resources
and training for examiners to ensure that brands are not deprived of the opportunity to
assert their rights from the very start. Once those rights have been established, rights-
holders may then turn to the issue of enforcement.
The availability of criminal penalties for intellectual property offenses, including
imprisonment and significant fines, is vitally important because of the significant
deterrent impact that such penalties carry. The application of criminal penalties also
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sends a clear signal to the public that the government considers the underlying acts to be
serious offenses. Rights-holders have long raised concerns about the Chinese
government’s over-reliance on administrative enforcement actions, which typically result
in modest fines. The nominal financial impact of such fines offers little discouragement
against recidivism. The trafficking of counterfeit goods is an illicit business, but a
business nonetheless. So long as the profits from their illegal enterprise exceed the losses,
whether in terms of financial losses or other penalties, there can be no expectation that
counterfeiters’ illegal activity will cease.
Generally speaking, counterfeiting operations in China are not subject to criminal
enforcement unless the relevant party is shown to exceed a given threshold (currently,
around the equivalent of $8,000). These thresholds alone would serve as a significant
obstacle to criminal enforcement, but in practice, the hurdle is even greater because of
the ways in which Chinese authorities have interpreted and implemented them. Police
and prosecutors are often reluctant to accept sales records or similar business documents
as evidence of the volume of counterfeiters’ illegal business. Instead, they frequently rely
only upon an offender’s inventory present at the time of their enforcement action.
Counterfeiting operations have been seen to take full advantage of this practice by limiting
the amount of merchandise on-hand at any given location and time. Rights-holders have
likewise pointed to refusals to consider “unfinished” products and components, records
of online sales of the same or similar products by the same individuals, and other such
evidence of the sales volume or overall scale of an operation when determining whether
the threshold for criminal charges has been met. IACC members have also raised
concerns regarding practices of the Pricing Bureau with respect to the valuation of
counterfeit goods. We’ve received reports that the Pricing Bureau in Shenzhen refuses to
assign a value to counterfeit products for which an authentic counterpart is not currently
offered for sale by the rights-holder (e.g., an older or discontinued model of a product),
even where a comparable authentic good is otherwise available in the market (e.g., via the
resale market or other third parties). As a result, significant quantities of counterfeit
goods seized during an enforcement raid may not be included when determining whether
the criminal threshold has been met. Not surprisingly, this overall approach tends to
result in far fewer criminal prosecutions than would otherwise be expected. We would
welcome action by the Chinese government both to reduce the current thresholds, and to
provide clearer guidance on the referral of cases to criminal authorities, ensuring that
aggregate sales and evidence are considered.
Rights-holders offered mixed reviews of their interactions with criminal enforcement
bodies during the past year, with some citing improvements in their willingness to
conduct raids and undertake investigations, particularly on larger cases spanning
provincial borders and involving coordination among different Public Security Bureaus
(“PSBs”). They’ve also pointed to improvements in partnering with PSBs and online
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platforms to act against larger-scale counterfeiting operations with both online and brick
and mortar components. Others however have noted that there is a wide disparity among
the willingness and effectiveness of police agencies to investigate cases and take actions.
Local PSBs in Guangzhou and Shenzhen were singled out for a lack of consistency, with
cases failing to progress efficiently or simply being rejected outright. A lack of necessary
resources and training are believed by some to be a root cause of this these negative
experiences. Protectionism likewise remains a concern in certain cities, limiting
opportunities for both criminal enforcement and civil actions.
Similar complaints have been raised regarding the judiciary. While some courts have
gained a reputation in recent years for increasing expertise in their handling of IP cases
and their recognition of the seriousness of counterfeiting and piracy offenses, in many
parts of the country this is not the case. Sentences remain insufficient to deter recidivism,
and courts have shown disinterest in acting to enforce settlement agreements where
convicted offenders have resumed their operations. The lack of supervision and oversight
during pre-trial release and post-conviction probation sentences was also raised by
rights-holders as an invitation to recidivism.
Though rights-holders may have little other recourse due to the constraints on criminal
enforcement discussed herein, administrative enforcement remains a challenge. AICs
and MSBs are described as often unwilling to take enforcement actions on behalf of rights-
holders. But where such action has been taken, the issuance of warning citations or
nominal fines have done little to discourage counterfeiters over the past decade,
particularly as sellers have learned to game the system and minimize their risk of more
serious criminal charges.
As reported in recent years, the trafficking of counterfeit goods online has become an
increasing concern in the PRC, perhaps more troubling because enforcement agencies
and prosecutors are seen as failing to evolve and keep pace with the changing business
models. During raids, PSB officers often do not collect or capture electronic evidence or
files that demonstrate the scale and scope of the target’s online business operations (and
as noted before, often focus solely on the physical goods located on-site). Some rights-
holders have reported good success in partnering with major online marketplaces to
prosecute major cases against large counterfeiting operations and their manufacturing
and distribution networks. Other selling platforms have been much less willing to work
with rights-holders however, and as a general matter, it remains far too easy for online
counterfeiters to remain anonymous and escape liability, particularly if they market and
sell to international customers outside of China. The identities of operators of standalone
websites trafficking in counterfeit goods are shielded from disclosure by national ISPs,
and the inability to pursue anonymous counterfeiters allows those individuals to operate
with impunity. More must be done to ensure that rights-holders and law enforcement
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can efficiently gain access to accurate identifying information for individuals whether on
standalone sites or large platforms. More frequently, counterfeit sales have been seen
moving to major social media sites, in part due to favorable privacy positions available to
them. Public prosecutors and law enforcement have not had much success in building
cases against large-scale operations on such platforms.
Rights-holders continue to closely monitor the development of China’s draft e-commerce
law. Of particular concern is the apparent deference that the draft law shows to online
sellers who dispute takedown requests for product listings that a brand has identified as
infringing. Unless amended, the result of such a policy could be to significantly increase
the availability of counterfeits online, to the detriment of legitimate manufacturers,
retailers, and consumers. Shifting the burden to rights-holders would greatly increase
the costs of enforcement, and in many cases, have the practical effect of precluding
enforcement altogether.
We would likewise welcome the Chinese government’s encouragement of intermediaries
in other sectors to work in a more collaborative fashion with law enforcement and rights-
holders. Chinese banks and payment service providers have resisted doing so to identify
and freeze counterfeiters’ ill-gotten funds. And the distribution of counterfeit goods to
consumers around the world is largely unfettered; online sellers’ shipper of choice
remains EMS China due to lax policies to ensure accurate descriptions of package
contents, valid return addresses, and the like. This same lack of reasonable and
appropriate controls has likewise been highlighted as a contributing factor to the current
opioid epidemic.
At several important national events throughout 2017, President Xi Jinping repeatedly
emphasized the need for strengthening the protection of IP rights. It was a welcome
message, and our comments have outlined a number of ways in which the PRC could
translate that message into concrete actions. Unfortunately, rights-holders have also
provided reported several reports which raise questions about the government’s political
will to take those necessary steps. As discussed herein, increasing reports of
protectionism are concerning; as is government officials’ seeming reluctance to tackle
some of the more complex counterfeiting issues in the market, such as the operation of
entirely fake retail stores. We are hopeful that the government’s actions in 2018 will more
fully align with its rhetoric.
While China has taken significant steps to improve its IPR regime in recent years, the
scope and size of the counterfeiting and piracy problems there remains unacceptably
severe, and many long-standing concerns have, to date, not been sufficiently addressed.
Notwithstanding the progress that China has demonstrated in some respects, it remains
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the country of greatest concern for IACC members in 2018. Accordingly, we support its
retention on the Priority Watch List.
INDIA
As noted in last year’s comments, rights-holders surveyed by the IACC continue to report
significant concerns regarding their acquisition of trademark rights in India. Problems
cited largely mirrored the complaints heard with respect to registration in China –
inconsistencies and poorly-reasoned refusals of registrations, as well as excessive delays
in the issuance of registrations that were approved. Significant delays associated with
cancellation and opposition proceedings likewise continue to be a source of
consternation. As discussed in our comments above on these issues in China, the inability
to obtain trademark registrations in the first place has a significant impact that resonates
throughout the entire business cycle. It may cause delays to entering the market and
preclude the ability to undertake any meaningful enforcement actions in the country. The
situation can be even more difficult in cases involving global brands with marks that are
already well-known to consumers, as low-priced counterfeits may be available before
their authentic counterparts have ever reached the market.
In 2017, India was retained on the Special 301 Priority Watch List, citing a wide range of
rights-holders’ concerns. During this year’s process, IACC members from multiple
product sectors continued to raise many of the same issues previously highlighted by
USTR including high levels of counterfeit manufacturing and retail sales of counterfeit
and pirated goods, trademark infringement, and ongoing problems related to border
controls, the judiciary, market access, and criminal, civil, and administrative enforcement
of their rights.
While some members spoke positively of their interactions with law enforcement, support
from the local police authorities varies widely across the country. Members spoke
positively of the police’s willingness to pursue offenders and to conduct raids but noted
that they’re hampered by chronic under-resourcing. That lack of resources is viewed as
contributing to IP-related offenses being given less priority than other types of crime. In
addition, police are said to focus their efforts mainly on the case at hand, rather than
investing in longer-term investigations to identify and prosecute higher-level offenders
such as manufacturers and large-scale distribution networks. Given the volume of the
trafficking seen in India, a “big picture” approach is key to substantial improvement; that
necessary progress is unlikely to materialize through retail level enforcement actions.
Improving Customs enforcement remained a priority for rights-holders over the past
year, and while we have heard reports of increased seizures in 2017, there remains
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significant room for improvement. Rights-holders have expressed their pleasure with
Customs officers’ willingness to engage with industry and to receive training – there’s
clearly a desire to do more in this area – but border control efforts remain relatively weak
overall. Further investment in targeting and continued training in product authentication
could pay significant dividends in decreasing the widespread availability of counterfeits
in the Indian market.
In recent years, rights-holders have noted marginal improvements to India’s enforcement
regime, but that progress must also be seen within the judiciary. Enforcement personnel
must have confidence that their efforts are not wasted. Rights-holders describe the
judicial system as “significantly over capacity,” while also citing the inflexible and overly-
bureaucratic nature of the litigation process in the country. Resolving cases can be an
exceedingly protracted and resource-intensive process, which in turn increases the
associated costs to rights-holders. The Indian government is seen to recognize the many
challenges faced by rights-holders and has discussed numerous avenues for reforming the
legal system, but tangible progress has been slow to materialize.
India remains a challenging place for rights-holders, and while we’re encouraged by some
reported improvements over the past year, we recommend its retention on the Priority
Watch List in 2018.
INDONESIA
Indonesia was retained on the Special 301 Priority Watch List in 2017 due to a number of
challenges faced by rights-holders including inadequate IP protection and enforcement,
and a host of obstacles to fair market access. In consultations with IACC members during
this year’s Special 301 process, rights-holders continued to report many of these same
concerns. Despite some noted increases in the number and efficiency of criminal raids,
the overall environment for IP owners in Indonesia remains very difficult. Border
controls, a large-scale retail trade in counterfeit goods, poor coordination and resourcing,
and official corruption were cited as rights-holders’ greatest concerns. Based on this
feedback, the IACC supports Indonesia’s continued retention at the Priority Watch List
level.
In each of the past two years, rights-holders have reported increases in the number of
raids conducted by police, but those efforts have been insufficient to significantly impact
the volume of counterfeits in the domestic market and their availability to local
consumers and tourists alike. Regrettably, rights-holders continue to report poor
coordination between the police and the Attorney General’s Chambers; the reported
increases in enforcement actions have not been met with a concurrent rise in
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prosecutions. As a result, the sole penalty faced by counterfeiters may be the confiscation
of their illicit goods. This is hardly sufficient to deter repeat offenses. As noted in last
year’s submission, the lack of prosecutions is also viewed as harming the morale of law
enforcement and diminishing interest in further actions.
In its 2017 Special 301 report, USTR rightly highlighted deficiencies in Indonesia’s border
enforcement regime. The lack of effective border controls continues to contribute to the
ease with which foreign-manufactured counterfeits enter the local market, and to the
exploitation of the country’s ports as a transshipment point for illicit goods destined for
other markets.
Rights-holders likewise remain troubled by corruption within law enforcement, which is
viewed as perhaps the most significant obstacle to effective enforcement. The Indonesian
government must underscore the importance of IP protection and enforcement by
ensuring that police are sufficiently resourced, properly trained, and empowered to take
the necessary action. And that action must be carried through by prosecutors and the
courts. Unfortunately, we’ve seen no indication of the political will required to take those
steps. Accordingly, the IACC supports Indonesia’s retention on the Priority Watch List
in 2018.
KUWAIT
Kuwait topped the list of IACC members’ priority countries in the Middle East this year,
with rights-holders citing a wide variety of concerns – many of which were discussed at
length in USTR’s 2017 report. Counterfeit goods remain widely available in the domestic
market due to a combination of lax enforcement at and within Kuwait’s borders,
protectionism, legislative deficiencies, and an insufficient application of resources or
political will to address these concerns. The severity of problems identified by rights-
holders remains high.
As stated by one rights-holder, the problems they face in Kuwait begin at the border. A
lack of coordination between Customs, the Trademark Office and the Commercial
Registry and the absence of a trademark recordation system contribute to Customs’ lack
of knowledge about rights-holders, and the paucity of notifications received by rights-
holders concerning detentions of counterfeit goods. Two major brands responding to this
year’s survey reported no seizures at all in Kuwait during the past year. Despite rights-
holders’ efforts at engagement and at conducting trainings, Customs is described as
generally uncooperative. Deficiencies in training and expertise could be offset if Kuwaiti
10
Customs adopted a more collaborative approach with their private sector counterparts,
but such a shift does not appear to be forthcoming.
Within the market, enforcement is described as sporadic, and likewise hampered by
insufficient training on IP crime for enforcement personnel. The officers of the Criminal
Investigation Department and Commercial Control Department inspectors lack necessary
resources to effectively carry out their IP enforcement functions, and a lack of
coordination between the various enforcement bodies is seen to contribute to significant
delays in the enforcement process, resulting in numerous actions being abandoned,
despite clear evidence of infringement. Where raids do take place, rights-holders have
raised concerns regarding transparency due to slow and often incomplete reporting of
seizures. We also continue to receive troubling reports of protectionism, as authorities
are described as extremely reluctant to take any action against Kuwaiti nationals, even in
clear-cut cases involving the trafficking of counterfeits.
The above-referenced lack of communication between the Trademark Office and the
Commercial Registry has also reportedly led to brands’ marks being improperly registered
by local businesses, and in turn leading to conflicting claims of rights to product and
business names, confusing consumers as to the true source of goods in the market.
Turning to the Judiciary, rights-holders report a need for significantly greater training to
develop expertise on intellectual property issues. Where cases have been brought, they
have progressed slowly, and the penalties imposed do not reflect the serious nature of the
offenses. Members also note an overly-formalistic approach to authentication; the lab of
the Ministry of the Interior and Kuwaiti Courts often require rights-holders to provide
genuine samples for comparison and reference, rather than permitting the submission of
authentication reports from impacted brands.
The scope and severity of the problems faced by rights-holders requires a holistic
approach by the government of Kuwait. Significantly greater resources must be applied
in order to diminish the widespread availability of counterfeits in the market. Greater
training and coordination among enforcement agencies is vital. All of this demands a
greater expression of political will by the government to acknowledge and address these
concerns in cooperation with rights-holders.
RUSSIA
Russia has been highlighted as a priority in IACC’s Special 301 submissions, dating back
more than a decade. Despite some progress, the country’s IP regime continues to pose
significant challenges for rights-holders across a wide variety of product sectors. A
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reform, and other factors contribute to the widespread availability of counterfeit and
pirated goods in Russia. Online trafficking remains a key concern for both trademark and
copyright owners, and consumer attitudes towards participating in the illicit economy
remain troubling. Though rights-holders noted with optimism some positive steps taken
by the Russian government over the past year, much more progress is needed.
Accordingly, the IACC recommends, as it has for over a decade, Russia’s retention on the
Priority Watch List in 2018.
The Russian statutory regime was the subject of mixed reviews from IACC members
during this year’s consultations. Some members commented positively on reforms in
recent years including Part IV of the Civil Code, opining that these legislative reforms have
been largely positive and made the environment more business friendly. Others have
noted however that the challenges their companies have traditionally faced in Russia
tended to be more a result of lax enforcement of the laws, than they were due to the laws
themselves. Despite the introduction of new anti-piracy legislation in 2015, rights-
holders report minimal impact on their ability to enforce their rights online, and Russian
ISPs are said to be generally unwilling to assist with such issues. Other rights-holders
highlighted the government’s revision of Article 180 of the Criminal Code as a well-
intentioned reform that has led to negative results in practice. That reform was intended
to bring about stricter punishments for organized groups involved in trafficking. The
practical effect though appears to have been a more permissive attitude towards smaller
or first-time offenders.
Enforcement was, similarly, an area in which we received both positive and negative
feedback during this year’s process. Members cited an apparent increase in the overall
level of enforcement and commented positively on increases in administrative fines for
IP offenses; monetary penalties for the illegal importation of counterfeit goods is said to
have increased three to five times in recent years. The Moscow Economic Police were
commended for positive collaboration with rights-holders in taking action against retail
shops, and some reported an increased willingness of police to accept case referrals based
on rights-holders’ preliminary investigations, and to undertake raids against well-known
outlets for counterfeits that were previously viewed as untouchable. That said, given
historical concerns about the level of enforcement in Russia, there remains significant
room for improvement. Enforcement personnel in some areas remain unwilling to work
with rights-holders, or simply appear uninterested in pursuing IP offenses. Additional
training could be helpful in easing these concerns, and we’d welcome additional action by
the government to underscore the importance of IP protection. One rights-holder noted
a dramatic increase in the number of seizures of counterfeit products by Customs during
the past year, which they attribute to their engagement of Customs officers and training
at key ports.
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As noted above, online issues remained a priority for rights-holders in 2017, but
enforcement remains hampered by a lack of cooperation from intermediaries (including
ISPs), the lack of a UDRP-like process, and a reluctance by police to pursue online
infringement and counterfeiting. As a result, civil litigation is often the only avenue
available to victims, but that approach is both expensive and viewed as having only a
minimal impact. Because of the limited authority available to courts in imposing
injunctions, targeted sites typically reappear quickly under different ownership. Greater
flexibility for the judiciary in crafting such orders, or a more efficient way of expanding
the application of injunctions without the expense and time of relitigating the issue would
be useful in addressing these concerns.
In addition to online trafficking facilitated by Russia-based websites, Russian consumers
are increasingly turning to websites and marketplaces abroad to purchase counterfeit and
pirated goods. This has resulted in a significant increase in the volume of small-parcels
of counterfeits entering the country via international mail, which Russian Customs is
reportedly unable, or unwilling, to seize. When such shipments are discovered, they are
typically returned to the sender – an unacceptable approach, for obvious reasons. The
only recourse available to rights-holders – assuming that they’re aware of the shipments
at all – is to file a civil action to seize the goods. As discussed above, this is not a feasible
model of enforcement, as the costs of litigation far exceed the value of the individual
shipments.
While members have commented positively regarding increased expertise among the
judiciary, and particularly at the appellate level, the penalties imposed in both the
criminal and civil realm remain too low, or too easily subverted as described above, to
serve as a meaningful deterrent. We would welcome additional action by the government
to underscore the seriousness of IP crimes, and were happy to learn that President Putin
has called for the establishment of a working group dedicated to the protection of rights-
holders. Another clear indicator of the government’s sincerity would be to crack down on
official corruption which remains rampant, and a significant concern for rights-holders.
Further, the Putin administration should invest in efforts to increase public awareness
regarding the range of harms implicit in the counterfeit trade as a means to decreasing
the demand for such products.
In light of the range and severity of concerns faced by rights-holders in Russia, the IACC
supports its retention on the Special 301 Priority Watch List this year.
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UKRAINE
Rights-holders have faced considerable challenges in Ukraine for many years, resulting
in the country’s designation as a Priority Foreign Country in 2013, along with numerous
recent appearances at the Priority Watch List level. These difficulties continued in 2017,
with IACC members reporting many of the same concerns heard in past years, including
legislative deficiencies, lax enforcement at and within the borders, and non-deterrent
penalties. Despite government commitments to improve the environment for IPR,
concrete progress has been slow to materialize, likely due in part to the range of political,
economic, and social upheavals in the country. Regrettably, member brands describe
Ukraine as a relative safe haven for counterfeiters operating online and in the brick-and-
mortar context.
Perhaps foremost among the concerns raised by rights-holders in Ukraine is the country’s
Customs enforcement regime. Counterfeit goods are said to enter relatively freely, and
Customs officers are very ineffective at targeting and interdicting those shipments.
Where detention notices have been received, they typically involve small volumes of
goods, and under procedures adopted in 2016, the onus for enforcement falls almost
entirely on the rights-holder. Upon notification that a detention has been made, rights-
holders must file an action with the court, and to obtain a judgment confirming the goods
as counterfeit. Absent an order from the court, the goods will be released. Given the slow
pace at which the courts are said to operate though, effecting seizures remains a practical
impossibility. Even with the availability of extensions from the court, the process is
expensive and time-consuming. This procedure also appears to conflict with Ukraine’s
Customs Code, which provides for Customs authorities to seize and destroy counterfeit
goods on the basis of a determination by a state expert. Rights-holders have reported
though that even when they have been able to avail themselves of the opportunity to
obtain an expert’s determination, their efforts have been hampered by the timeframe
imposed, they’ve been discouraged by the cost (estimated at between $1,500 - $2,000),
or they’ve found the purported expert to lack the requisite expertise to make an accurate
determination.
Customs officials in Ukraine have also reportedly adopted a procedure for small parcels
and international postal shipments similar to that reported in Russia. Counterfeit goods
entering the country by that mode of transport are simply returned to the sender rather
than seized and destroyed. We are also unaware of any efforts to capture data related to
such shipments for subsequent targeting or enforcement.
Despite efforts to increase engagement and training with the police, Cyber-Police,
Customs, State Fiscal Service, and General Prosecutor’s Office, rights-holders report
little, if any progress. Though the various authorities have repeatedly expressed interest
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in doing more to assist rights-holders, there has been little action to match their rhetoric,
and no tangible results. As noted in prior submissions, the government’s lack of
transparency remains a concern.
Rights-holders continue to report the widespread availability of counterfeit goods in both
the traditional retail market and online. And as noted in prior years, the concerns online
mirror many of the issues seen in Russia, particularly with regard to the lack of
cooperation from intermediaries.
Finally, trademark owners have again noted difficulties in quantifying damages, whether
in relatively straightforward counterfeiting and piracy cases, or for more general
infringements and deceptive trademark practices (e.g., misuse of trademarks in
advertisements and store signage). This in turn leads to a lack of clarity regarding
whether sufficient harm can be shown to meet minimum thresholds for criminal
enforcement. As a result, administrative enforcement – and its associated minimal
penalties – remains the rule, providing little meaningful deterrence.
In light of the range and severity of the problems that rights-holders continue to face in
Ukraine, we support its retention on the Priority Watch List in 2018.
THE AMERICAS
ARGENTINA
It is perhaps an understatement to say that 2017 was an eventful year for intellectual
property enforcement in Argentina, with a number of high-profile incidents including the
arrest of Jorge Castillo, the so-called “King of La Salada,” as well as a major ongoing
investigation of corruption within the country’s Customs agency. Rights-holders have
reported a number of positive actions throughout the past year, though many serious
concerns remain.
We are pleased to have received reports of significantly increased activity among both
federal and local law enforcement agencies over the past year, including the arrests of
many involved with illegal activity at La Salada, and the above-mentioned internal
investigation which led to the seizure of over 3,000 illegally imported containers.
Customs seizures are increasing but remain below those volumes seen at their peak in
2012. Ex officio actions by law enforcement have also reportedly increased. While this
activity is viewed with optimism, rights-holders have adopted a wait-and-see approach;
previous large-scale enforcement operations as recent as 2015 have not been sufficient to
remedy long-standing concerns in Argentina, and much work remains to be done.
15
As noted in recent years, counterfeiting and piracy online have become an increasing
concern. Legislation relating to ISP liability is currently under consideration, and rights-
holders have expressed concerns about provisions of that bill which preclude ISP liability
related to any content uploaded or generated by a third-party, except where the ISP has
been ordered to block or remove the content and fails to act. ISPs would have no general
obligation to monitor third-party content, but also would have no obligation to take action
with actual notice of a clear infringement.
Among other legislative concerns raised by rights-holders, we are aware of ongoing work
to undertake a comprehensive reform of the Criminal Code, including criminal IP
provisions, and will be closely monitoring that work in the coming year. One area which
is ripe for improvement is the imposition of deterrent penalties for IP offenses. Despite
reports of increased enforcement in 2017, and of higher damage awards in civil cases, the
penalties imposed in IP cases often remain far too low to serve as a deterrent. Rights-
holders would also welcome the reintroduction and enactment of legislation to address
long-standing concerns related to landlord liability.
As noted in other jurisdictions, online sales from websites operating abroad to consumers
in Argentina have resulted in a significant increase in the volume of counterfeit goods
arriving at the border via small parcels. We urge Customs to engage with express
consignment carriers as well as the public mail service to develop strategies to address
this influx of illicit shipments.
Concerns related to corruption remained pronounced in 2017, though clearly the
administration is taking steps to address those issues. We are aware of the arrest of two
officers of the Buenos Aires Police, and one from the Federal Police on corruption charges.
These instances, and those related to the Customs investigation have encouraged rights-
holders that the government takes the matter seriously.
Though we are pleased with the efforts demonstrated by the Argentine government over
the past year, a number of the efforts discussed herein are works in progress, and we await
more concrete developments. Accordingly, we support its retention on the Priority Watch
List in 2018.
BRAZIL
IACC members continue to report a broad range of severe concerns in Brazil. Despite
concerted efforts by rights-holders to draw attention to the host of legislative deficiencies,
market access barriers, insufficient enforcement, and corruption that they contend with
in the Brazilian market, the illicit trafficking of counterfeit and pirated goods remains
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unacceptably high. In each of the past two years, we have recommended Brazil’s elevation
to the Priority Watch List level; based on member feedback this year, we make the same
recommendation in 2018.
Rights-holders’ concerns in Brazil begin at the most fundamental level – the acquisition
of rights, market access, and the country’s statutory framework for dealing with
counterfeits. With regard to the first issue, IACC members report continuing, and
significant, delays at the Brazilian Trademark Office (“BTO”). Both registration and
opposition procedures are described overly burdensome. The BTO has been faced with a
backlog of applications, and despite recent efforts to address that problem with the hiring
of new examiners, IP owners report little progress. The influx of new examiners is also
pointed to as an underlying cause of sometimes poor and/or inconsistent decisions.
Better training to improve reliability and predictability of those decisions, and to increase
the efficiency of their procedures is vital. Brands from a number of sectors also continue
to report difficulties entering the market due to high tariffs that are intended to protect
local manufacturing. Often however, the tariffs are seen less as an aid to local
manufacturing than as an incentive to smugglers who supply the black market with
counterfeit and diverted versions of legitimate products. And as reported in prior years’
submissions, Brazil’s statutory regime does little to discourage the importation and sale
of illicit goods. Under the current provisions of Article 190 – Law 9.279/96, the penalties
for counterfeiting-related crimes are limited to a fine, or detention of one to three months.
Custodial sentences remain rare though, and as a practical matter, offenders are likely to
receive a small, and certainly non-deterrent, fine. For over a decade, rights-holders have
urged the enactment of Bill 333/1999 to bring the penalties for counterfeiting offenses in
line with those available for copyright violations – two to four years imprisonment, plus
a fine – but those calls have fallen on deaf ears. Rights-holders have no expectation that
convicted offenders will be discouraged from resuming their illegal activity under the
current statutory regime.
Despite the statutory constraints, IACC members continue to seek opportunities to work
with the various enforcement bodies throughout Brazil. Unfortunately, those efforts
remain exceedingly difficult. As the largest market, and a hotspot for the distribution of
counterfeit goods, Sao Paulo has long been a focus of rights-holders’ efforts. Under the
city’s former mayor Fernando Haddad however, the local government’s anti-
counterfeiting and anti-piracy efforts were deprioritized, allowing sellers of counterfeit
goods to operate largely with impunity, especially in well-known and notorious markets
like the 25 de Marco street and Bras region. Rights-holders turned to civil actions and
saw some success; in 2016 a Public Civil Action was filed against the Sao Paulo City Hall
on behalf of the National Council to Combat Piracy and the Brand Protection Group,
seeking to revoke the license of the company responsible for leasing space to tenants of
the Shopping 25 de Marco’s main building. This was followed by raids this past summer
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by the Federal Revenue Service and Public Prosecutors, resulting in the seizure of tens of
thousands of counterfeits, along with the temporary closure of the mall. Rights-holders’
optimism has faded somewhat since then, as they report that no charges have been
pursued against the owners / landlords, and that the sale of counterfeits has returned with
the mall’s reopening. Corruption within the Sao Paulo Police is said to be the worst in all
of Brazil and must be rooted out.
Elsewhere in the country, rights-holders report similar concerns. With regard to Rio,
we’ve also heard significant concerns involving corruption within the police department,
along with very few raids. As a result, there’s an apparent decrease in confidence with the
specialized police unit in Rio, and brands are relying more on the public prosecutors in
their stead. In Brasilia, the specialized police unit that was previously tasked with IP
enforcement has been shut down entirely; rights-holders do report continuing operations
of a similar unit in Recife however.
While Customs seizures have reportedly increased, particularly in the south of the
country, overall seizures at the border remain very low when viewed in the context of the
size of Brazil’s market and the availability of counterfeits to consumers. An emphasis on
enforcement at the tri-border region and more deterrent penalties are critical to making
progress on this front.
Though some respondents spoke positively about their interactions with the Brazilian
judiciary, as noted previously, judges have limited discretion in imposing deterrent
sentences under the existing law. They’re likewise hampered by the lack of statutory or
treble damages in civil matters. Some rights-holders also continue to take issue with the
pace of litigation, citing judicial inefficiencies which lead to increased costs, an issue made
more problematic by the low level of damages generally expected by brands.
Though we’d reported pleasure last year at reports of increased activity by the National
Council Against Piracy and Intellectual Property Crimes (“CNCP”), the opposite appears
true this year. Respondents indicated that they were aware of no meetings of the group,
and no substantive actions undertaken.
Participants in this year’s process underscored the continuing severity of the issues they
face in Brazil, and their growing concerns related to corruption as the most significant
factors underlying our Priority Watch List recommendation. We urge the Brazilian
government – both at the federal and local levels – to take the steps necessary to address
the concerns raised this year, and for many years, in these comments.
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CANADA
As was the case in this year’s consultations with regard to Mexico and Brazil, rights-
holders expressed great frustration not simply over the range of difficulties they face
enforcing their rights in the country, but also over the years they’ve waited for progress
on those issues to match the Canadian government’s professed commitment to ensuring
an efficient and effective IP regime. For well over a decade, the IACC has recommended
Canada’s inclusion at the level of Watch List or above, citing statutory deficiencies, border
control concerns, a lack of engagement by law enforcement, and a variety of other
concerns. During that time, progress in some areas has frequently been matched, or in
some cases outweighed by regression on other issues. Too often, the reported issues
remain unchanged year over year. The Canadian government’s action on IP has yet to
match its rhetoric, and that includes investing the necessary financial resources and
manpower to effectively combat the trafficking of counterfeit and pirated goods both at
and within the country’s borders. The government’s inaction comes at the expense of
intellectual property owners across all sectors. In light of the feedback received from
rights-holders this year, the IACC recommends Canada’s elevation to the Priority Watch
List level.
Upon its taking effect in 2015, rights-holders welcomed the arrival of the Combatting
Counterfeit Goods Act (“CCGA”) which, among other things, provided a statutory basis
for criminal trademark counterfeiting. The new authority appears to have done little to
encourage criminal investigations and prosecutions however. As noted in last year’s
comments, trademark owners continue to report a lack of priority for IP cases. Rights-
holders have long bemoaned the reorganization that was undertaken by RCMP several
years ago which left a significant vacuum in Canada’s IP enforcement regime, and which
has yet to be filled.
IACC members highlighted an overall lack of enforcement as the single greatest problem
that they face in Canada. By way of example, rights-holders reported that they were
unaware of any counterfeiting cases (on their own behalf or otherwise) that were pursued
by the Royal Canadian Mounted Police (“RCMP”) in 2017. Similarly, we’ve seen no
reports of criminal enforcement at any flea market throughout the entire country during
2017 – including the St. Eustache Flea Market, north of Montreal, Quebec, alleged to be
a major location for the obtaining of counterfeit consumer products for resale by retailers.
Nor have there been any reports of criminal enforcement at any shopping mall, including
at the Pacific Mall, in the Greater Toronto area, which was included on USTR’s most
recent Notorious Markets List. Further, we are aware of only one criminal case in Canada
involving counterfeit consumer goods during the past year, and that case did not result in
a prosecution.
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This is not to say that Canadian law enforcement is uninterested in pursuing IP-related
cases. Rights-holders have seen significant interest among front-line officers in pursuing
counterfeiting and piracy cases, recognizing the frequent intersection between IP crimes,
organized crime and gang activity, consumer fraud, and public safety concerns. Despite
that interest though, the Canadian government has not prioritized IP enforcement, has
neglected to provide enforcement agencies with the necessary resources to undertake
those actions, and has failed to provide a workable framework for cooperation and
collaboration among its enforcement bodies. That final point is of particular concern, as
there is an apparent lack of clarity or understanding by Canadian law enforcement as to
their respective roles in dealing with intellectual property crimes. When municipal/local
law enforcement are contacted they often take the position that IP crime is the
responsibility of the RCMP. While that may have been the case years ago the fact is that
the RCMP has abandoned IP crime and has not proceeded with IP enforcement for
approximately the past four years. This has resulted in not only local law enforcement
being confused but also CBSA who, in many instances, still contact the RCMP to see if
they will proceed with a criminal investigation (which they do not and have not for the
above-mentioned four-year period).
The Combatting Counterfeit Goods Act, likewise, brought about new authority for the
Canada Border Services Agency, including ex officio powers to detain counterfeit goods
at the border. Regrettably, that new authority has not been accompanied by increased
seizures; some respondents report even fewer seizures today than prior to the new law’s
enactment. Rights-holders have expressed their greatest concerns with regard to the
process which was developed to implement the new customs authority. The CCGA was
drafted, and has been implemented, with an eye toward revenue-neutrality. In short, the
Canadian government has provided a framework for border enforcement, but the costs
associated with availing oneself of CBSA’s efforts to interdict counterfeits at the border
are borne by the rights-holder rather than the government or by the importer of the illicit
goods.
As implemented, CBSA has created a “Request for Assistance” process, similar to U.S.
Customs & Border Protection’s trademark recordation process, allowing rights-holders to
register their marks with the agency. Unlike the system in place in the United States
however, Canada provides no administrative authority to the CBSA to assess on its own
whether goods that it has detained are in fact counterfeit and therefore subject to seizure.
Instead, CBSA provides a notification of its detention, at which point the burden is shifted
entirely to the rights-holder to file an action with the courts to effect a seizure of the goods.
The costs associated with that litigation, as well as the costs associated with the storage
(and subsequent destruction) of the goods are borne by the rights-holder. Not
surprisingly, rights-holders tend to view the process as unnecessarily expensive and time-
consuming. Some have been less charitable, describing it as a “pay for play” model of
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border enforcement. If the rights-holder fails to file a complaint within the requisite
timeframe, the suspect goods are released for entry. The burden of costs becomes even
more pronounced as more and more often, counterfeiters have taken to importing their
illicit goods via small parcels, and rights-holders are likely to be forced to file ever greater
numbers of actions to address the volume of traffic. Regardless of the procedural
considerations, the overall volume of seizures remains troublingly low given the size of
the Canadian market, and the level of counterfeits which continue to be seen in retail
markets throughout the country. Canada must commit to investing significantly greater
resources in CBSA and to empowering the agency to deal with counterfeits in a more
efficient manner if it hopes to decrease the volume of counterfeit goods entering the
country.
Given the above-discussed obstacles to criminal enforcement, and CBSA’s lack of
authority to resolve border enforcement matters administratively, civil enforcement is
often the only legitimate option available to rights-holders. And while respondents
feedback regarding the judiciary was generally positive, civil litigation can be a time-
consuming and expensive foundation for a brand protection program. Given the lack of
statutory or treble damages in such cases – another long-standing complaint of rights-
holders – which limits brands’ potential recovery at trial, litigation is simply not viable in
many cases.
As described in last year’s comments, there is a sense among rights-holders that the
Canadian government lacks the political will to effectively address their perennial
concerns. That view has not changed over the past year, nor in the three years since the
enactment of the Combatting Counterfeit Goods Act. In light of the above, we recommend
Canada’s inclusion at the Priority Watch List level in 2018.
MEXICO
The IACC has recommended Mexico’s inclusion on the Special 301 Watch List for over a
decade, citing numerous concerns related to the country’s statutory and enforcement
regimes. Regrettably, progress in Mexico has been slow to materialize, if it has at all, on
a broad range of issues. Due to this lack of substantive improvement on a variety of IP-
related issues, and members’ growing frustration at the perceived lack of priority shown
by the Mexican government in addressing these matters, we recommend Mexico’s
elevation to the Priority Watch List in 2018.
The Mexican criminal system was amended in 2008, with an intent of simplifying
processes and improving the overall efficiency of the system; nationwide implementation
of these reforms was anticipated by June 2016. These reforms were focused in large part
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on expediting case procedures to allow for more prompt resolutions, and with an aim to
improving recovery by victims rather than focusing on punitive imprisonment of
offenders. Criminal proceedings remain overly formalistic though, and a number of
difficulties have been experienced during the implementation of the above reforms.
Mexico’s formalism has long been noted as a concern by rights-holders, particularly with
regard to its impact on enforcement, with rigidly-defined roles and authority for various
actors within the system – the seizure of goods by Mexican Customs provides an example
of this in action. Mexican Customs has no statutory authority to seize infringing or
counterfeit goods on their own initiative; that action requires an order either from the
Mexican Trademark Office or from a prosecutor. That lack of ex officio power – both with
respect to imports, and goods in-transit through Mexico – has been raised as a priority
concern of the IACC for many years. Customs’ limited authority in this regard would
create difficulties under the best of circumstances, and even under the traditional model
of large-scale imports of counterfeits via cargo containers. Customs must typically release
goods for entry within five days of their inspection, while the time required to obtain an
order of seizure often significantly exceeds this; in some cases, we’ve received reports of
orders for seizure being sent to Customs over a month after the goods have been released.
Such large-scale shipments are becoming less frequent however, as Mexico has seen a
trend towards importing counterfeit goods via small consignments, similar to that seen
in the United States and elsewhere. The process for seeking to seize such smaller
shipments may be even more onerous. Again, the bureaucracy impedes action by
Customs.
Rights-holders report that the Specialized IP Unit of the Attorney General’s Office has
announced that it would no longer receive complaints related to courier packages, citing
that its mandate was to address larger cases involving amounts of approximately 1 million
Mexican Pesos. Those claims are instead now sent to another section of the Attorney
General’s Office for review and referral to the relevant State offices, often resulting in
weeks of delay. Disputes over the proper procedures for maintaining and verifying the
chain of custody for packages that may be examined by Customs and other law
enforcement officers have resulted in prosecutors refusing to proceed with cases, as
they’re unable to confirm that evidence presented to them is reliable. This has occurred
despite guidance in the National Criminal Process Code providing that, “when during the
chain of custody process, the evidence, instruments, objects of crime were altered, they
will not lose their value as evidence unless the authority verifies that they have being
modified in such a way that they are not efficient to prove whatever fact,” and judicial
precedent confirmed that criteria. The Attorney General’s Office should clarify the
government’s position on this matter, given the significance of its impact on effective
enforcement.
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Customs enforcement has also been hindered in Mexico by a failure to enforce existing
laws related to the obligations of customs brokers who whether willingly, through
negligence, or otherwise, are complicit in the illegal importation of counterfeit goods.
Customs brokers are not liable criminally for the importation of counterfeit products, but
they do have an obligation to declare accurate and truthful information in connection with
the shipments that they facilitate. In this regard, Mexican Customs Law sanctions
customs brokers that provide an inaccurate name or address of an importer, with
penalties including the revocation of their permit to operate as a broker. Rights-holders
would also support the adoption of a clear requirement that customs brokers, and other
similar intermediaries such as freight forwarders, cooperate with rights-holders by
disclosing relevant identification and other data of their customers who have been found
to be illegally importing counterfeit goods. Rights-holders report relatively few cases in
Mexico seeking to enforce the current provisions.
Recidivism remains common in Mexico, due in part to the above-described formalism, as
well as the non-deterrent level of penalties, and lapses in coordination between Customs
authorities and prosecutors to ensure that repeat offenders are properly identified, and
that prosecutions and the imposition of significant penalties are pursued.
Within the domestic market, rights-holders offer mixed reviews of the state of
enforcement. While members commented positively on the efforts of the Federal Police
to organize raids, including a significant raid carried out at the notorious market of
Tepito, sales of counterfeit goods remain rampant. Cooperation from law enforcement
agencies is said to vary widely across the country, but frequently described as slow and at
times wholly unresponsive. Penalties remain far too low to discourage repeat offenses.
Rights-holders also note concerns about the use of government “IP experts” to provide
formal determinations in counterfeiting cases. Some report negative experiences with
clearly erroneous determinations by the appointed experts, leading to concerns about
corruption within the system. These concerns are similarly noted with regard to the use
of experts by Mexican Customs. The examination procedure that has been adopted has
also been viewed as problematic, as rights-holders are typically requested to provide a
genuine sample for reference use by the expert. Respondents note that the criminal
offense of counterfeiting is defined by Mexican statutes in terms of the copying of a mark
without substantial modifications, so any such comparison should focus on the mark
alone, rather than a holistic comparison of the authentic and suspect goods.
Proceedings are made more costly and time-consuming than necessary with the
continued application of requirements that trademark owners provide original copies of
trademark registrations to demonstrate ownership; such information is readily available
via government-managed databases and registries.
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With regard to copyright-related matters, rights-holders continue to seek the full
implementation of the WIPO digital treaties, including provisions related to technological
protection measures. The adoption of implementing legislation is essential to ensure the
availability of the rights afforded under those treaties, given reports of an outstanding
lack of knowledge from prosecutors and judges in this area, and in recognition of the
wholesale changes that have occurred in the copyright enforcement landscape in recent
decades.
A final concern raised by rights-holders involves Mexico’s recently introduced opposition
procedures. While a positive step, the procedures adopted fail to recognize “bad faith” as
a basis for challenging a registration. Bad faith registrations are a growing problem not
only in Mexico, but around the world, and providing such a basis could preclude more
expensive and time-consuming disputes that will necessarily arise if bad faith applications
are allowed to issue.
Given the broad range of issues that require attention in Mexico, and the long-standing
nature of many such concerns without much-needed progress, we recommend its
elevation to the Priority Watch List in 2018.
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MALAYSIA
In last year’s Special 301 report, USTR commented positively on progress made in
Malaysia, singling out both the Special Anti-Piracy Task Force for its efforts in deterring
and preventing networks that distribute counterfeit goods, as well as the Ministry of
Domestic Trade Cooperative and Consumerism (“MDTCC”) Special Internet Forensic
Unit’s work to address illicit activity online. During this year’s consultations however,
rights-holders have noted that despite the government’s work to steadily increase the size
of the enforcement division of the MDTCC, the increased resources have not resulted in
any significant improvements in the outcome of IP enforcement actions. These concerns
are due, in part, to the limited number of criminal prosecutions following enforcement
actions; such prosecutions remain exceedingly rare. Penalties also lack deterrence,
resulting in a high number of repeat offenders who demonstrate little concern about their
likelihood of prosecution. The administrative enforcement process is, likewise, viewed as
ineffective due to the minimal penalties imposed.
Rights-holders continue to experience significant difficulties with regard to border
enforcement in Malaysia. Some major brands reported almost no seizures, despite high
volumes of counterfeits available in the local market; cooperation between Customs and
the private sector is hampered by the lack of a trademark recordation system. We’ve
likewise heard concerns about the lack of coordination between Malaysian Customs and
the enforcement division of the MDTCC; Customs is expected to engage the MDTCC’s
assistance whenever a consignment of suspected counterfeit goods is uncovered, but such
referrals appear to happen rarely.
In last year’s submission, we reported a member’s consternation related to a series of
significant raids involving large-scale sellers of counterfeits that had taken place nearly
two years prior, but which had resulted in no follow-on prosecutions. In the year since
that filing, no progress has been seen on that case. The relevant shops continue to
operate, and none of the responsible parties have faced prosecution.
While the Malaysian government has taken positive steps in recent years to demonstrate
its commitment to fighting IP crime – including the application of increased manpower
and resources, and the development of specialized units to deal with long-standing
problems – we strongly believe that significantly greater progress could be achieved.
Increasing the number of criminal prosecutions is vital and would serve as a clear signal
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to importers and sellers of counterfeits – and to Malaysian consumers – of the seriousness
of IP offenses. The adoption of a trademark recordation system could likewise pay
significant dividends in improved cooperation between Customs authorities and rights-
holders. Finally, greater coordination between Customs and the MDTCC is essential to
ensuring the identification of targets for investigation who have for too long operated with
relative impunity. We would welcome the Malaysian government’s leadership in
addressing these concerns. We recommend Malaysia’s retention on the Watch List this
year.
THAILAND
Thailand was retained on the Priority Watch List in 2017 but following the conclusion of
an Out-of-Cycle Review, USTR announced its movement to the Special 301 Watch List.
The Thai government has taken some positive steps over the past year, including the
creation of the National Committee on Intellectual Property Policy, as a means to
improving interagency coordination, while also highlighting its political will to address a
wide variety of long-standing concerns. In light of those efforts, and additional
commitments made by the government to continue its improvement, the IACC agrees
with the decision to remove Thailand from the Priority Watch List. However, rights-
holders will be watching closely to ensure that the Thai government follows through on
those commitments and makes strides in several other areas identified in previous
submissions.
Thailand was commended by rights-holders for its generally strong legislative framework
with respect to anti-counterfeiting; complaints tend to focus more on the practical
application of those laws, rather than on the laws themselves. One concern, also raised
in past years, relates to the lack of prosecutorial discretion available under Thai law, which
results undue burdens on the court system and a sense that “all cases are created equally.”
Greater discretion would allow both police and prosecutors to focus greater resources on
larger operations and more serious offenses that could have a more significant impact in
terms of deterrence. In addition, respondents during this year’s process continue to point
to provisions in the law that allow for a mandatory sentence reduction in cases where
offenders plead guilty, minimizing the practical impact of convictions. The frequent
suspension of sentences has a similar effect.
While the Thai government has taken some steps to address registration backlogs for
trademarks, and has joined the Madrid Protocol, rights-holders still report significant
delays at the Trademark Office and would welcome additional actions to remedy these
issues. Similar to the reports concerning India, the excessive pendency times for
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trademark applications have in some cases served as a major obstacle to the enforcement
of IACC members’ rights, particularly in those cases involving globally-famous marks
already well-known to Thai consumers.
While we commend Thailand for the steps taken to date, and as noted in the Out-of-Cycle
Review, greater efforts are required. As such, we recommend Thailand’s retention on the
Watch List in 2018.
Rights-holders continued to experience challenges to the enforcement of intellectual
property in Vietnam over the past year. Despite some positive developments, counterfeit
goods remain readily available in both physical and online markets. On a positive note,
members have noted improved border enforcement – a priority raised for many years,
and increases is government support and priority. Conversely, rights-holders expressed
dismay at apparent corruption, a need for more prosecutions, and more stringent
penalties – particularly in terms of administrative enforcement actions. We recommend
Vietnam’s retention on the Watch List in 2018.
Members singled out the National Office of Intellectual Property, in the Ministry of
Science and Technology for praise, noting their strong support of rights-holders’ criminal
and civil enforcement efforts. The deputy head of the agency, Le Ngoc Lam, has been
quoted in the press highlighting the importance of such efforts; such public statements
are essential to both the public’s and government and law enforcement officials’
awareness of the importance of IP protection.
The need for increased efforts by Vietnamese Customs, including improved coordination
with the country’s Chinese counterparts, was raised as a key priority in the IACC’s
comments in past years. We’ve been pleased by progress on this front, with positive
feedback from rights-holders in each of the past two years’ consultations. Members again
reported increased border seizures during this year’s discussions.
Online enforcement in Vietnam has become increasingly important to rights-holders in
recent years, and while members have commented positively on their interactions with,
and the responsiveness of, the Ministry of Science and Technology in addressing their
concerns online, more must be done to address the pervasiveness of stand-alone websites
and online platforms trafficking in counterfeit goods.
Despite this positive feedback, rights-holders remain frustrated at the lack of progress
seen on a number of other issues highlighted in past years’ comments. Among the most
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serious of those are the continued reports of corruption with the Market Management
Bureau and Economic Police, which has been tied to compromised raids and an overall
lack of prosecutions. An over-reliance on administrative enforcement, with its
characteristically low penalties, is also viewed as a continuing obstacle to significantly
improved enforcement. Addressing the problems of corruption and ensuring that more
cases are referred for criminal sanctions could have a positive impact throughout the
marketplace, particularly given rights-holders’ consistently positive views of the
judiciary’s expertise in handling IP-related cases.
EUROPE, MIDDLE EAST, AFRICA
EGYPT
Egypt was retained on USTR’s Special 301 Watch List in 2017, due to a wide range of
concerns related to the country’s protection and enforcement of IP rights. IACC members
continued to report that many of the issues raised previously remained problems during
the past year. Though the Egyptian government has expressed a willingness to do more
in the area of IP, enforcement bodies remain underfunded, penalties low, court
proceedings are described as slow-moving, and enforcement efforts are hampered by
outdated legislation.
Some rights-holders have noted an apparent increase in raids undertaken by the internal
trade police, but under existing law, counterfeit goods are typically left in the custody of
the vendor rather than seized by enforcement officials. Due to a lack of transparency and
delays in adjudication, which in some instances is said to take years, the goods are more
likely to be sold than to be removed from the stream of commerce. Enforcement efforts
are also said to be hindered by the low penalties imposed on offenders – typically non-
deterrent fines, and the lack of verifiable destruction of counterfeit goods. Rights-holders
noted cases in which courts have permitted the simple removal of counterfeit marks, and
the subsequent release of the unbranded goods, opening the door for relabeling after the
fact. Enforcement online is not viewed as being a priority of the government, though such
trafficking appears to be increasing. Corruption is also viewed as a significant obstacle to
enforcement, as rights-holders report instances of enforcement actions being
compromised due to leaks.
Concerns related to a lack of transparency were also heard with regard to customs
enforcement; Egyptian Customs is said to rarely report detentions of goods, and rights-
holders do not have a clear picture with regard to the volume of products interdicted. We
are aware of some recent changes in Customs’ procedures which were undertaken to
improve inspections, and which are reported to have resulted in detentions at the ports
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in Alexandria and Port Said. Rights-holders would welcome further efforts by Customs
in this regard, and more robust collaboration with the private sector.
On a positive note, the Egyptian government is said to be receptive to the idea of
improving IP protection as a means to attracting foreign investment. Addressing the
priority concerns raised in these comments would be a useful start to doing so. Given the
current lack of resources available though, Egypt remains a very challenging market for
IP owners. Accordingly, we support Egypt’s retention on the Watch List in 2018.
KINGDOM OF SAUDI ARABIA
The Kingdom of Saudi Arabia (“KSA” or “Saudi Arabia”) is one of the largest and most
important consumer markets across the Middle East, and as such, holds strategic
importance to rights-holders across all product sectors. While IACC members continued
to report significant concerns in the region, we have received positive feedback regarding
the level of enforcement – particularly with regard to efforts by Customs in addressing
counterfeit imports. Though we are pleased by the reported progress, greater resources
and transparency would be welcome, as would a more strategic approach to enforcement.
We applaud the improvements made to date but recommend Saudi Arabia’s retention on
the Watch List in the coming year. We look forward to working with the Saudi
government to continue building on the advancements that have been made in recent
years.
Saudi Arabian Customs was described by one respondent as perhaps the most active
customs organization in the Middle East region; they further noted that Customs’ efforts
had resulted in a greater volume of seizures of counterfeits for their company than they
saw anywhere else in the region. Customs seizures are said to be up across a number of
ports, including Riyadh, Jeddah, Dammam, and at the Saudi / UAE land border in Al
Batha. Such reports are encouraging, as they indicate wholesale buy-in from Customs
personnel throughout the country, rather than concerted efforts at a single entry point.
Members also shared positive feedback regarding Customs’ notifications of rights-holders
about detentions and seizures, and about their prompt destruction of counterfeit goods.
Rights-holders do note however the need for greater transparency, and for the provision
of more detailed information about those enforcement actions. In some cases, affected
brands receive only very limited notices including some sample pictures of the goods
involved. Additional reporting regarding the identity of the importer, the quantity of the
goods, and other relevant data included in entry documents could enable more thorough
investigations up the distribution chain. The call for improved transparency also
underlies concerns over Customs’ lack of a central reporting mechanism for seizures,
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which can contribute to lapses in communication, while also opening the door for
corruption. Finally, we’ve received reports of possible instances of re-exportation of
detained counterfeits – an issue that has caused concerns for several years in the UAE;
we strongly discourage the adoption of such a process in Saudi Arabia.
Despite the reported increases in seizures, counterfeit goods remain readily available in
Saudi Arabia. We’ve received mixed responses concerning market enforcement by the
Anti-Counterfeiting and Fraud Department with the Ministry of Commerce and
Investment (“ACFD/MOCI”), with some members describing them as engaged and happy
to support enforcement efforts, citing a number of raids against retailers and wholesalers.
Conversely, we’ve also received reports from some members of a sharp decrease in market
raids. Respondents concurred however that the ACFD/MOCI should focus greater efforts
on higher-level offenders and wholesalers who supply the broader market. Closer
coordination with rights-holders to identify “hot spots” for more regular and targeted
enforcement sweeps would likewise be helpful. To facilitate these actions however,
greater resources for Saudi enforcement personnel are essential; some areas remain
understaffed and simply lack the manpower at present to make IP enforcement a priority.
Increases in enforcement should be also be met with penalties that truly deter recidivism.
Unfortunately, the penalties imposed by Saudi authorities do not typically fall into this
category. Administrative enforcement often simply results in the seizure of counterfeit
inventory, and the destruction of goods. In some cases, members report that vendors are
served with notice of their offense, but that the goods are left in the offender’s custody
pending destruction, permitting the continued sale of the illicit goods in the interim.
Nominal fines may be assessed, but brands report that vendors’ shops are rarely closed
by the ACFD/MOCI, even in the cases of repeated offenses. We encourage the Saudi
government to build upon the positive results that have been reported to date but support
Saudi Arabia’s retention on the Watch List in 2018.
NIGERIA
Nigeria remains a high priority for IACC members, but rights-holders report many
ongoing concerns in the country, many of which have been discussed at length in prior
years’ submissions. In recent years, Nigeria has become both a target destination market
and a preferred transit route for counterfeit and pirated products. Despite some progress
in the country, Nigeria’s IP enforcement regime is viewed as weak, and could benefit from
both legislative amendments and the implementation of a more coordinated approach to
enforcement. Rights-holders also urge a more concerted effort by the government in
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raising public awareness and stamping out corruption which has hindered effective
enforcement in the past.
Nigeria has no specific anti-counterfeiting law, at least not one of general application that
covers all types of goods. As such, the fight against counterfeits often requires the creative
application of various laws that affect rights holders in one way or another. This may
include a combination of civil court action, criminal court action, or engagement of
various regulatory or administrative bodies. The end result reported by respondents is
that brand protection efforts in the country are often overly-complicated and
unnecessarily costly to rights-holders.
IACC members welcomed the development of a trademark recordation system, but have
reported that, in practice, it operates as a largely informal notification system; a more
formal process would be beneficial. Rights-holders also commented positively on the
collaboration between the National Customs Service and other agencies, including the
Standards Organization of Nigeria and the Nigeria Copyright Commission, with regard to
carrying out joint inspections of goods at the border. These sorts of collaborative
approaches are viewed as a key to overcoming frequent resourcing concerns as the volume
of goods flowing across Nigeria’s borders increases. The establishment of the
independent Customs Intelligence Unit is also indicative of the more strategic approach
to enforcement that should have longer-term benefits to addressing the trafficking of
counterfeit and pirated goods. Despite these positive steps, and efforts by rights-holders
to engage with their counterparts in enforcement, rights-holders note an apparent
increase in the volume of counterfeits seen in the domestic market in recent years.
Increased resources, and an increased priority on IP enforcement are both seen as
necessary for significant progress to materialize.
As noted in past submissions, rights-holders continue to raise concerns about the
expertise of the judiciary, describing lengthy judicial processes and undue delays to
adjudication that unnecessarily increase the cost of enforcement; as well as the imposition
of non-deterrent penalties that do not reflect an appreciation for the seriousness of
offenses. The low level of penalties is likewise seen as contributing to the widespread
perception among consumers – and of some enforcement personnel - that counterfeiting
i